A lot has been said about how the user base of wallet firms will shrink dramatically in the aftermath. But the biggest blow will probably land elsewhere.

Q: What's common between, say, Rs 10,000 worth of stuff on Amazon, and gold up to Rs 2 lakh?A: You can buy them without having to prove your identity.But let's say you want to walk into money-remittance shops like EbixCash, Eko India Financial, or Transerv, and send Rs 1,000 through their prepaid payment instrument (PPI) channel.Nope. You cannot - unless you prove your bona fides via an Aadhaar-based know your customer (KYC) process. WHAT HAPPENED? February 28, 2018, was the last day for mandatory KYC compliance by PPI channels - which also include mobile wallets like Paytm and MobiKwik. Although about 90% of wallets are not KYC-compliant, the Reserve Bank of India (RBI) refused to extend the deadline. A lot has been said about how the user base of wallet firms will shrink dramatically in the aftermath, leading to huge losses and even job...

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Options like NEFT, IMPS, or UPI aren't too popular with the migrant labourer segment because they need hand-holding.

Q: What's common between, say, Rs 10,000 worth of stuff on Amazon, and gold up to Rs 2 lakh?

A: You can buy them without having to prove your identity.

But let's say you want to walk into money-remittance shops like EbixCash, Eko India Financial, or Transerv, and send Rs 1,000 through their prepaid payment instrument (PPI) channel.

WHAT HAPPENED? February 28, 2018, was the last day for mandatory KYC compliance by PPI channels - which also include mobile wallets like Paytm and MobiKwik. Although about 90% of wallets are not KYC-compliant, the Reserve Bank of India (RBI) refused to extend the deadline.

A lot has been said about how the user base of wallet firms will shrink dramatically in the aftermath, leading to huge losses and even job cuts.

Most migrant workers do not have an address proof for the city from where they send money. Their identity documents and bank accounts are generally linked to their native addresses. Moreover, they frequently shift base given the nature of their work. For them, passing the KYC test is a tall order.

Listen to a payments veteran who spoke to ET Online on the condition of anonymity:

"This is Holi time. A lot of workers would want to send money back home. Banks will be closed, and you expect these workers to visit a bank branch and deposit money?"

Options like NEFT, IMPS, or UPI aren't too popular with this segment because they need hand-holding. "So, they [prefer] transactions through wallets and get real-time confirmation that the money has been received," he points out. "Remittances through PPI are also done at a lower commission of 1%-1.25%."

Anyone can walk into a bank branch, fill up a demand draft form, and transfer up to Rs 50,000 without any verification, he adds. For wallets, the monthly cap is Rs 10,000.

WHAT ABOUT THE BUSINESS? A company that wants a wallet licence must have a paid-up capital of Rs 5 crore. Within the first three years, it must achieve a net worth of Rs 15 crore, and maintain it thereafter.

"To launch a wallet business, you have to be big and serious. So, the RBI must allow the players to scale fast. This move is going to force several small players or those struggling for funds to shut down," says a co-founder of a Delhi-based payments firm.

Vinay Kalantri, founder and managing director of The Mobile Wallet, says the new norms are putting the industry on the edge. "They will take away the convenience associated with wallet payments. Only 40% to 45% of [our] customers have completed the full KYC process so far. If asked for compliance, the other customers might move on to bank branches or their business correspondents."

WHO'S SMILING? The "nexus of intermediaries who offer to transfer money at 2%-2.5% commission," as per the industry veteran.

"With great difficulty the remittance players removed intermediaries and made the system more transparent and low-cost … I don't understand why the RBI did not think about this as it will only push this segment of workers back to informal channels," he says.

Also smiling: document forgers. "Those who want to do dubious transactions can easily forge documents," fulminates the veteran. "A 100% eKYC is not possible because Aadhaar is still document based. Today a lot of banks can't trace culprits because of dubious documents … so you pass the buck to PPI?"

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